Mini Budget - How does it affect your tax ?

How does the mini budget announced by the DPM on 10 Mar 2009 affect us as salaried employees ? Basically, not much.

There are only 2 relevant issues as far as personal tax is concerned.

1. Tax exemptions for retrenchment benefits
   Under the present law, if you are retrenched and receives retrenchment benefits, you are allowed exemption of RM6,000 on your retrenchment benefits for each completed year of service. This amount has been increased to RM10,000 if you were retrenched on or after 1 July 2008.
   
2. Relief for interest on residential housing loans to set off against personal income. If you are buying a residential property and the Sales & Purchase Agreement is dated from 10 March 2009 to 31 Dec 2010, the housing loan interests that you pay can be set off against your personal income, up to a maximum of RM10,000 each year over 3 years from the first year housing loan is paid. The property must also not be rented out.

If you are not retrenched and not going to buy a residential property or a car, then there is absolutely NOTHING for you.

The other issues which might be of interest, but not tax related are :-

1. If you wish to pursue your studies at Master or Ph. D level, the government will subsidise the fees of up to RM10,000 and RM20,000 respectively. These courses must be enrolled in local universities. Full details can be obtained from the Ministry of Higher Education by clicking here.
   
2. If you are retrenched, you can apply to your bank to withhold your housing loan payment to the banks for 1 year.
   This is just s delay of payment. The longer you delay the payment, the more interest you will have to pay at the end, although it does provide a breather space for those who cannot fork out the instalment payments now.
   
3. If you have extra money, you can buy government bonds for 3 years which give 5% interest per year. The details of this are not yet finalised. Considering housing loans are relatively cheap now (some are offering BLR-2.2%) At the BLR rate at 5.95 now, it may be more beneficial to invest in this bond than to repay the housing loan.
   
4. If you want to change cars, buy a Proton or a Perodua and trade in you old cars (must be more than 10 years old) and get a rebate of RM5,000.
   

IS INCOME FROM GOOGLE ADSENSE TAXABLE ?

I have come across many forums discussing this issue. Obviously many bloggers and website owners want to know this and turn to the internet (where else) to find the answer.

There are many opinions given in the forums and discussions. However, many opinions given are based on different individuals’ understanding (or misunderstanding) of the Income Tax Act (ITA).

Simply answering 'YES' or 'NO' is not enough, we have to understand why and justifications for our answer. However, if you are not bothered about the details, then I can tell you that in my opinion, it is 'NO'.

Why? Let's look at the ITA.

Section 3 of the ITA reads:-
“........ a tax to be known as income tax shall be charged for each year of assessment upon the income of any person accruing in or derived from Malaysia or received in Malaysia from outside Malaysia.”

This implies that income from Google AdSense falls squarely under taxable income as it is clearly "income received in Malaysia from outside Malaysia".

HOWEVER, Para 28(1) of Schedule 6 of the ITA (tax exempt income) defines non-taxable income as:-
“..... income of any person other than ...company...derived from sources outside Malaysia and received in Malaysia."

Therefore, income from Google AdSense would have been taxable (as specified in Section 3), had it not been for Para 28(1) of Schedule 6 which clearly exempts it.

Additional Tax Deductions Available for Individuals

The following is a list of tax deductions available for individuals to make a claim when filing his/her Income Tax Borang BE or B for 2008 onwards.

For employees, if you have any of these expenses, you can request your employers to reduce your PCB deductions by filing up the Borang TP1.

1. Medical expenses for own parents certified by medical practitioner (limited to RM5,000 a year);
2. Basic supporting equipment for disabled self, spouse, child or parents (limited to RM5,000 a year);
3. Disabled person (self) (RM6,000 a year);
4. Education fee (self) up to tertiary level for the purpose of acquiring law, accounting, Islamic financing, technical, vocational, industrial, scientific or technological skills or qualifications or for a Masters or Doctorate level, undertaken the purpose of acquiring any skill or qualification (limited to RM5,000 a year);
5. Medical expenses on serious diseases for self, spouse or child (limited to RM5,000 a year);
6. Complete medical examination for self, spouse or child Limited to RM500 a year (total deduction for para 4.5 and 4.6 is limited to RM5,000 a year);
7. Purchase of books / journals / magazines / similar publications for self, spouse or child (limited to RM1,000 a year);
8. Purchase of personal computer for individual. Deduction allowed once in every 3 years. (Limited to RM3,000);
9. Net deposit in Skim Simpanan Pendidikan Nasional (limited to RM3,000 a year);
10. Purchase of sports equipment for any sports activity as defined under the Sports Development Act 1997 (limited to RM300 a year). This is explained here;
11. Payment of alimony to former wife (Total deduction for wife and alimony payments shall not exceed RM3,000 a year);
12. Disabled husband / wife (RM3,500 a year);
13. Life insurance (and EPF limited to RM6,000 a year);
14. Education and medical insurance (limited to RM3,000 a year);
15. Zakat other than monthly zakat deduction from salary;
16. Fees / Levy paid by a holder of an employment pass, visit pass (temporary employment) or work pass.

Further, the IRB has released a list of tax-free income and perquisites available to individual taxpayers. This list is listed here.